1. 1 DEPARTMENT OF ENVIRONMENTAL AFFAIRS AND TOURISM REPORT TO THE SELECT COMMITTEE ON THE MRLF ANNUAL REPORTS FOR 2002 to 2005 AND 2005/2006 30 JANUARY 2007

2. 2 VISION “TO BE A PROSPEROUS AND EQUITABLE SOCIETY LIVING IN HARMONY WITH OUR NATURAL RESOURCES” MISSION “TO LEAD SUSTAINABLE DEVELOPMENT IN THE ENVIRONMENT AND TOURISM SECTOR FOR A BETTER LIFE FOR ALL”

3. 3 BACKGROUND The Marine and Living Resources Fund (MLRF) was established in terms of the Marine Living Resources Act (MLRA) of 1998 MLRF was listed as a Public Entity in 2001 The fund must generate its own revenue The main sources of income are from levies on fish products; license fees and permits, fines and confiscations, harbour fees & transfers from DEAT Personnel expenditure is funded by the vote of the department

4. 4 ANNUAL REPORT 2002 - 2005 SUMMARY OF ACHIEVEMENTS 9 new fisheries sectors over 5 years Planning for Long-term rights allocations (LTRAMP) – both policies and procedures Planning for expansion of the country’s Marine Protected Areas (MPAs) Amended regulations for the control of use of vehicles in the coastal zone Blue Flag beaches piloted Programme to halt illegal developments on the coastline initiated

5. 5 ACHIEVEMENTS 2002/5 (CONT) National Contingency Plan for the Prevention and Combating of Pollution from Ships developed in partnership with SA Maritime Safety & Dept Transport Took delivery of 2 new protection vessels (Lillian Ngoyi & Sarah Baartman) & commissioned a further 2 vessels Benguela Current Large Marine Ecosystem (BCLME) project launched African Journal of Marine Science published

6. 6 Office of the CFO (Challengers) - 2002-2005 Revenue into the Fund has been erratic over the 2002,2003 and 2004 years. Operating expenses increased significantly. Annual increases for 2003, 2004, and 2005) have been 25%, 27% and 50% respectively. Cost control has been historically poor. Debtors increased significantly. No proper budgeting or budget control process. General accounting principles and practices not adhered Reconciliations not performed. Lack of supporting documentation. Inconsistencies between cash and accrual accounting methods. There was no Financial System in place or Proper Cash Management. Staff were not properly skilled and guided.

7. 7 MARINE LVIVING RESOURCES FUND ANNUAL REPORT FOR 2005/2006 30 JANUARY 2007

8. 8 Spending Trends 2005-2006 Fund must generate its own revenue – Biggest source of revenue is levies charged on fish and fish products. Vessel Costs for the year R101 million – 35% of the fund expenditure. DEAT Transferred R501 million for the purchase of 4 new compliance vessels – 2 commissioned in 2004/05 and remainder 2 delivered in 2005/06. R38 million is being transferred over the period 2004- 2007 for the Langebaan Coastal Erosion project. R108 million has been allocated for the replacement of the research vessel Sardinops – Delivery March 2007.

9. 9 Spending Trends 2005-2006 (cont..) Government Grants transferred from DEAT - 2005/06 - R93 million: R25m – Vessel operating cost R33m – Procurement of research vessel R14m – Langebaan coastal erosion R21m – Financial assistance R45 million went towards the LTRAMP process. Personnel expenditure is funded by the vote of the department. Revenue generated as at 31 March 2006 – R259 million. Total expenditure for the year – R375 million.

10. 10 CHIEF DIRECTORATE: RESOURCE MANAGEMENT PURPOSE: Facilitate sustainable & equitable use of marine & coastal resources Regulating the utilisation of marine resources through the administration of fishing rights, permits & licenses Stimulating economic growth & restructuring of the fishing industry

11. 11 ACHIEVEMENTS General Fishing Policy approved by Cabinet 20 Fishery specific policies developed (target:20) Consulted 9000 fishing stakeholders on policies New model for determining application fees for long-term fishing rights developed – introduced a sliding scale of fees linked to value of the fisheries Allocation of long-term rights in 20 fisheries (target:20) CHALLENGES Complexity of resolving appeals i.t.o. long-term allocations Allocation of rights in the subsistence and small scale fisheries – limited understanding of these sectors

12. 12 CHIEF DIRECTORATE: MONITORING, CONTROL & SURVEILLANCE PURPOSE: Preventing and eliminating illegal marine activity ACHIEVEMENTS Strengthening of EPV fleet through delivery of 2 more inshore vessels (Ruth First & Victoria Mxenge) [fleet of 5] SADC/regional cooperation through 1 patrol to Marion Island and 2 patrols to Tanzanian & Mozambique 171 Fisheries Control Officers at 31 compliance stations conducted ongoing patrols & inspections

13. 13 ACHIEVEMENTS (CONT) 5 Memorandums of Understandings signed to increase compliance capacity Provision of 2 full time prosecutors for the Environmental Court in Hermanus CHALLENGES Financial costs of operating the compliance vessels Ongoing need to recruit and train compliance staff Organised nature of poaching

14. 14 CHIEF DIRECTORATE: INTEGRATED COASTAL MANAGEMENT PURPOSE: Managing human impacts on the marine & coastal environment through: –Regulating coastal developments –Regulating marine pollution –Promoting marine ecotourism & mariculture –Managing marine protected areas (MPAs) ACHIEVEMENTS Draft aquaculture policy Promulgation of 4 new MPAs (Stilbaai, Kei, Gxulu & Gonubie) [target:6]

15. 15 ACHIEVEMENTS (CONT) Designation of S.A’s southern continental shelf waters as Special Area by the International Maritime Organisation (protection for seabirds against oil pollution) Consensus on the Coastal Management Bill 20 local beaches awarded Blue Flag status CHALLENGES Difficulty in reaching consensus delayed passage of the Coastal Management Bill

16. 16 CHIEF DIRECTORATE: RESEARCH, ANTARCTICA & ISLANDS PURPOSE Provision of advice on the sustainable utilisation of marine and coastal resources by carrying out appropriate research Providing infrastructural support for S.A’s research in the Southern Ocean and Antarctica ACHIEVEMENTS Ongoing research/surveys on state of fish stocks (6 cruises) Recommendation of TACs & TAEs in 18 species (target:18) BCLME collaboration on predator-prey relationships & by-catch

17. 17 ACHIEVEMENTS (CONT) Marion Islands research facility construction 70% complete. Completed feasibility study to replace SA Agulhas. Made progress towards replacement of the Sardinops. Successfully completed Marion and Gough Island expedition & Antarctic Relief Expedition. AJMS published online.

18. 18 CHALLENGES Recruitment & retention of scientists, particularly black scientists INTERNATIONAL RELATIONS Ongoing positive relations and cooperation with partners (Norway, Australia and new Zealand) Signing of South East Indian Fisheries Organisation (SEAFO) Ongoing honouring of regional & international obligations

19. 19 Demographics - Branch Pink- Indians, Green – Africans Yellow Yellow- Coloureds, Blue- Whites

20. 20 Office of the CFO - TARGETS FOR 2005-2006 Render effective and efficient financial management for the MLRF. Complete and sign of Audits for 2002 to 2005 and publish Annual Report. Skills capacity and staffing issues to be addressed. Take over accounting function from Consulting firm. Commission the development of a new integrated financial and procurement system. Commission the development of a Cost Recovery Framework for the Fishing industry. Develop a portal for all database systems. – (MAST) Prepare a budget for 31 March 2006. - Ensure correct MTEF submission to Treasury Ensure compliance to all regulations (PFMA, Treasury Regs, SCM, GRAP). Ensure all revenue due to the fund is collected timeously. Balance income and expenditure whilst providing public good services. Appoint Internal Auditors for the fund. Set BEE procurement spending target at 47%.

21. 21 ACHIEVEMENTS Appointed a full-time CFO Completed 4 years of audits and published annual report. Appointed a consortium to develop a cost recovery framework. Trained all staff in 1 st phase damelin accrual accounting. Took over financial function from consulting firm. Appointed debt collectors. Instituted legal action against previous developers of the failed financial system Submitted treasury reports timeously.

22. 22 ACHIEVEMENTS Appointed NDT to develop and implement an integrated financial and procurement system for the fund. Institutional design approval – 3 directors in office of the CFO. Appointed a consortium to develop a cost recovery framework for the fund. Monthly management reports produced, costs brought under control. Control measures implemented for better managing of MLRF resources.

23. 23 IMPLEMENTATION CHALLENGES AND/OR RISKS Managing limited cash resources. Lack of historical data for debtors. Limited skills and internal capacity.

24. 24 MARINE LIVING RESOURCES FUND ANNUAL FINANCIAL STATEMENTS 31 March 2002 31 March 2003 31 March 2004 31 March 2005 31 March 2006

25. 25 INCOME STATEMENTS

26. 26 BALANCE SHEETS

27. 27 AUDITOR-GENERAL REPORTS 1.31 March 2002 - Qualified Audit Opinion 1 x Qualification 4 x Emphasis of Matter 2. 31 March 2003 - Qualified Audit Opinion 2 x Qualifications 8 x Emphasis of Matter 3.31 March 2004 - Disclaimed Audit Opinion 5 x Qualifications 7 x Emphasis of Matter 4. 31 March 2005 - Disclaimed Audit Opinion 2 x Qualifications 5 x Emphasis of Matter

28. 28 AUDITOR-GENERAL REPORT (cont..) All 4-years reports lead to the following:-  Lack of Internal Control;  Lack of compliance to the PFMA;  No proper accounting and fixed asset system;  Lack of Historical Data and Supporting Documentation;  Insufficient control on Debtors and Income;  Failed to adhere to the principles of Accrual Accounting;  Staffing Issues.

29. 29 AUDIT COMMITTEE REPORT 31 March 2006 Audit Committee responsibility - Meet 4 times a year – (Committee met twice) -The effectiveness of internal control - (Not effective) - The quality of monthly and quarterly reports submitted in terms of the Act – (Unable to review) - Evaluation of annual financial statements – (Concurs with AG report)

30. 30 AUDITOR-GENERAL REPORT QUALIFICATIONS – Disclaimed Audit Opinion 1. Property, plant and equipment. 2. Revenue and trade and other receivables. 3. Trade and other payables. 4.Expenses. 5. Contractual commitments. 6. Inventories. 7. Pay-as-you-earn (PAYE). 8. Cash flow statement. 9. Opening balances.

31. 31 AUDITOR-GENERAL REPORT EMPHASIS OF MATTER 1. Weakness in internal controls 2. Non-compliance with laws and regulations 3. Audit Committee 4. Previous audit report

32. 32 ANNUAL FINANCIAL STATEMENTS Statement of Financial Performance

33. 33 ANNUAL FINANCIAL STATEMENTS Statement of Financial Position

34. 34 ANNUAL FINANCIAL STATEMENTS Notes to the Financial Statements

35. 35 ANNUAL FINANCIAL STATEMENTS Notes to the Financial Statements

36. 36 ANNUAL FINANCIAL STATEMENTS Notes to the Financial Statements

37. 37 END